Are We in Another Tech Bubble?

There’s a reason why a lot of the world’s top investors, like Warren Buffett, don’t invest in technology — it moves too fast. And it’s too hard to track whether the hot stock or idea of today will be worth anything in five years. Buffett famously references the auto industry when he talks about his aversion to technology stocks. There were hundreds of car companies in the U.S. during the early part of the 20th century, but only a handful survived and made investors any money over the long haul.

The big question is, Are we in a bubble right now? First, my gut feeling. I’ll come clean here and share that back in 1999, I was actually recruited to join a Citigroup-funded technology incubator in London called “Antfactory,” which aimed to invest in pan-European media plays. (Yes, I cringe as I write those four words.) The very fact that such firms were hiring journalists as partners was clearly the sign of a market top. And while there’s certainly more substance to many of today’s hot firms, like Twitter or Facebook, than there was to, say, Pets.com or many other iconic firms of the late 1990s, I do feel the same frothy enthusiasm in the market as investors put enormous valuations on firms that still don’t make any money. I also sense a lot of bubble-like hubris from techies themselves.

Beyond this, it’s a question of whether you believe in the business model of social media and online retail today, which is essentially a landgrab that (hopefully) gets turned into profitability at some later date. The Financial Times has done a lot of smart analysis and number crunching on this. Their verdict: the jury is still very much out on the longer-term profit trajectory of the hot social-media companies of the moment. And having ridden one dot-com bubble and bust, I’m personally sitting this one out.

Joe Nocera, Charlie Herman and I explored this point as it relates to the technology sector today, and firms like Twitter and Snapchat, in this week’s episode of WNYC’s Money Talking. The topic comes up about halfway through the show.